Non-Profits, Corporations & LLCs, Oh My!

Posted by American Ltd on Aug 4, 2015 8:30:00 AM

What's the Right Choice For My Business?

which entity type  do I choose? question non-profit corporation llc

The primary entity types available in the United States are Corporations, Limited Liability Companies and Non-Profits. Corporations issue shares of stock to owners and are run by officers and directors. Limited Liability Companies (LLCs) are owned by members and can be run by the members or appointed managers. Non-profit organizations offer similar limited liability protections to corporations and LLCs, but have the added benefit of tax free existence as defined under section 501(c)(3) of the IRS Code. How do you know which entity type to choose? A lot of factors go into deciding which entity type is best for you.  These include legal liability, tax implications, costs and future needs.  This is an important decision and should be done after consulting a trusted accountant or attorney.  


Comparing Entity Types:


  C Corporations   S Corporations   LLCs         Non-Profits
Liability of Owners

Limited, even if shareholders participate in management

Limited, even if shareholders participate in management Limited, even if shareholders participate in management  Unlimited
Number of Owners No maximum Maximum 100 (as of 2005) No maximum, minimum of at least 2 One
Profit/Loss & Distributions Special allocations permitted separate classes of stock  No special allocations permitted Special allocations permitted N/A
Transferability of Interests No restrictions No restrictions, but must be eligible shareholder of "S" status terminates Restricted, typically requires approval of majority of members N/A
Federal Income Tax Maximum 35% on Corporation, plus tax on dividends to shareholders No corporate tax unless previously a C corporation None at LLC level Taxed on individual return


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